Tuesday, November 27, 2012

Love the one you're with

Stephen Stills may be an odd fellow to consult for investment advice but as I looked over my portfolio this morning an old song by Stephen Stills played in my head: "If you're down and confused . . . love the one you're with . . . "

When the market takes a drubbing, that is the time to buy. Buy low and sell high, right? But, the big question is "What to buy?"

Over the years I've noticed I grow attached to some of my investments. These are the ones that perform well year after year and attract very positive attention in the investment community as a whole.

A good example of one of these rather well admired stocks is Crescent Point Energy. When it dropped to about $19 in the middle of the stock market crash a few years back, it looked awfully good. I'd owned it for years. It had performed admirably. It was now down but everything was down. Everything was telling me that this was a time to buy, an opportunity of a lifetime, but what to buy.

Among the stocks I bought were Crescent Point (CPG), Inter Pipeline (IPL.UN) and Bank of Nova Scotia (BNS). Later, I sold some of my excess CPG and IPL.UN. Both were represented in my portfolio by an out-of-balance allocation. When IPL.UN climbed above $20, I moved on, but I still hold CPG (up 71 percent) and BNS (90 percent). I believe IPL.UN was up more than a hundred percent when I moved on.

I should note: Today both CPG and IPL.UN are included in the ScotiaMcLeod Canadian Income Plus Portfolio. IPL.UN is still on my radar and if it every gets dragged down by a market wide correction, I'll be and owner of that stock again.

Today, I have some stocks that may be working their way into my heart. Cathedral Energy (CET) immediately comes to mind. If the WisdomTree ETF AUSE ever has a solid correction, I would pick up some more units.

I am sure your portfolio is different than mine. Still, you must have some investments that you love, that you have great confidence in, confidence that comes from years of ownership and a solid understanding of the stock involved. If you wish you owned more, when the next large correction hits give some thought to adding to your position.

Addendum:

After posting this, I heard from a reader who told me they have an investment that meets the "love the one you're with" criteria: Dundee REIT.

I gave a quick check using my ScotiaBank account and read: "Maintain 2-SP rating; one-year target up modestly to $40.25 per unit. Down 8.6% from its YTD high, we believe valuation is looking more interesting at 15.1x 2013E AFFO and 6.5% implied cap. We think Dundee offers good capital upside,
along with modest distribution-per-unit growth potential."

I like that D.UN.TSX is down 8.6% from its YTD high. I agree with my reader, this one is worth watching.

I've heard from another reader. This person suggests that the U.S. ETF PEY would be a good addition to this list. (I wasn't posting a list, but I'll let that pass.)

PEY's full name is Powershares Exchange Traded Fund Trust High Yield Equite Dividend Achievers Portfolio. Wow! Quite the mouthful.

I know a little about PEY as I own a little but I haven't given this holding much attention in more than a year. (I blush.) PEY is well off its former highs - down a good 33 percent at least. That said, at its present price PEY is yielding just more than four percent. Considering its present price, it may not drop all that much more if hit by another downturn in the economy. It has had the stuffing kicked out of it. (My holdings are down about 17 percent.)

That 17 percent loss translates, for me, into a loss of about $2000. Softening the blow is the monthly dividend of about $33. The monthly yield varies a little. If the stock doesn't budge from its present position, in five years I'll have reclaimed my loss. Taking inflation into account, let's say six years to break even.

If I was younger I would not be seeing those numbers as positive. But I am retired. I need four percent from my money to live. PEY is paying four percent. I'm content, not happy, but content. But those numbers are why I didn't add PEY to my list. Now I think if PEY were to drop below my original entry point, my reader is right, it would be an investment to consider.

Saturday, November 24, 2012

LIM and other assorted investments

I'm still holding my LIM. No surprise here. The big question is: "Will iron ore prices recover in 2013?" A lot of bight folk are saying, "Yes." Still it is a crap shoot at this point.

I don't have a lot of skin in the game but enough to add a little spice to my portfolio. A "win" with LIM might not make me rich, I don't have enough stock. But a win might pay a few months of my expenses in retirement. Nice.

And a loss? It might cost me a couple of weeks of  retirement-living-expenses money. Not a big deal.

Never play, and I do mean play, with more money than you are comfortable losing.

My other bets have been doing much better than LIM.

  • CET (Cathedral Energy Services) is up marginally and I have been enjoying the good dividend while waiting for a turn-around in the oil patch. 
  • My REM (a U.S. iShares ETF) is well off its highs but it is still up from my entry point and is still delivering a fine 11.34% dividend. I have no complaints. 
  • My Sun Life Financial is up almost 30% and carries a nice 5.3% yield helping pay the bills in retirement.
  • AUSE, an ETF from WisdomTree, hasn't done much since I bought a few shares but it has been paying its way with a 4.81% yield. That's almost a full percentage point more than what I need to balance my books in retirement.
  • I keep adding to my RY (Royal Bank) holdings whenever the stock has a major dip. RY is up about 20% and paying a 4.1% dividend based on today's stock price.
  • My ZUT is up too, but it is not an ETF that I am enamoured with. I'm not all that fussy about some of the holdings. Still, it is up and paying me a dividend of about 5.2% to hold my nose. I'd like to make a bundle on a couple of my dogs, like LIM, and then I'd buy some more utilities. I could buy something like Fortis or Emera but I am leaning towards another ETF. This time I'd buy XUT. It is only yielding 4.44% today but I believe it would partner nicely with my ZUT holdings.

I have cutback my budgeted income from dividends for the coming year based on my concern about the stability of the high-yielding Penn West dividend. If the yield is cut, so be it. I am prepared. If the yield isn't cut and oil prices climb out of the present hole, I'll celebrate.

As of today, my portfolio has delivered almost 6% year to date. It was down of late but the market has been recovering over the past few days. It may still be a fine year for my investments when I close my  books on 2012 in another five weeks.

Monday, November 19, 2012

YTD_Up!


 As I wrote in my last post, don't panic. I don't know how your portfolio is doing in this wildly gyrating market but mine has bobbed to the surface. I am now $176 into the black for the year.

I was forced to remove more than thirty thousand to meet my and my wife's expenses this year. That's more than I like to remove but I'm comfortable with the such a large withdrawal now and then. Heck, if I live into my 70s the government will force me to withdraw even larger amounts. I've got to give that some thought and be prepared if I am lucky enough to face the problem.

I am not panicked by the fiscal cliff the U.S. is racing towards. My gut feeling is that it is more of a fiscal slope. I believe the slow but plodding recovery in the States will continue. Europe is going to provide a steady diet of financial shocks in the coming year but it looks as if it is weaving its way through the financial mine field. In China, the economy is slowing, but when the former pace of growth is factored in, it is easy to believe China has some wiggle room as it prepares to enter 2013.

In other words, I see my portfolio as still under attack, still gaining and then losing and then gaining again, but come January 2014 I expect to be comfortably into the black and that, in these trying times, is good enough for me.

Just "Don't panic."


Saturday, November 17, 2012

YTD_down

Yes, I took a lot of cash from my portfolio this year to live. But it still bugs me that I am down year to date. I like to end each year with my principal intact. It is only mid November, there are still about six weeks left for the market to rally. I'm hopeful.

But, this weekend my portfolio value is down almost a full percent from its January opening. The markets have not been kind to me since the American election. Is there a direct correlation between Obama's re-election and the falling market? I doubt it.

There are a lot of things going awry in the world and it may just seem like a good moment for some profit taking. I know I seriously considered going to cash a few weeks before this recent pullback. I was pushing my all time high and anytime I break that barrier I expect a pullback.

I figure the first time I unload on reaching my personal best, that will be the time the market goes on a wild bull run. I guess I'll just quietly lick my financial wounds, buy a few bargains and wait for the inevitable rebound.

My dividends are accumulating and come January or February I should be able to withdraw enough money to get me through four or five months. And at that time there will be more dividends to remove.

I have already calculated a drop in dividend income starting in 2013. For one thing, I own Penn West and I have a bad feeling about that generous payout. If it is cut, it will come as no surprise.

My portfolio may be down but my spreadsheet tells me my bills will still be paid and that all that is important is right in my financial world.

Friday, November 16, 2012

A lot of the shine has come off LIM

I just read that some stock pickers are lowering their target price on LIM. I checked  my ScotiaBank report and discovered the one year target is now $1.60. Not good. It seems odd that the stock is still rated 1-Sector Outperform. Since I bought in, the stock has dropped has lost 46.2 percent.

I've considered buying more and averaging my per share cost down to eighty some cents, but no. I'm just going to let this stock ride and see where it takes me. I can still see a profitable exit on the horizon, on the very distant horizon.

On the bright side, when I visited the TD site that I can access, there are four strong buy recommendations on LIM, two buy and six hold. The are no sell recommendations or even underperforms.

Thursday, November 15, 2012

Don't Panic

If you read my piece in The Globe and Mail, you know that one of the best bits of advice I've come across for stock market investors was on the cover of The Hitchhiker's Guide to the Galaxy: "Don't Panic."

Since the American presidential election, the Canadian market has been in a real tailspin. One more day like the last few and all my profits for the year will be wiped away.

At the close of trading today, my portfolio value was less than it was at the beginning of the year. This does not mean my investments are in the red, not if you take into account that I have removed more than $30,000 this year in order to live. Some years retirement is not as cheap as others. This year was a budget killer.

From New York Times, 9:53 p.m.
What does tomorrow hold? Hard to say, but if the markets in Asia are any indication, and sometimes they are, I may keep my head above water. I may even see my bottom line climb above my January opening value. The Nikkei is up 1.88% and the Hang Seng is up a tad, 0.18%. China is down and by almost one percent. I'll keep my fingers crossed, stay cool, and I won't panic.

By the way, my investment in Labarador Iron Mines (LIM) is testing my resolve. I noticed today it was trading around 66-cents. I don't have a lot of exposure, it is not a big deal, but still it's leaving a big, red stain on my balance sheet. Penn West (PWT) is not causing me as much grief but it is a close second. Time to let those two sink or swim on their own. I'm turning my investment interest to my more solid performers. Maybe I pick up a few shares of something good at a bargain price when this retreat ends.

I'll keep you posted.

Wednesday, November 14, 2012

I distrust my local paper for financial guidance.

The local paper claimed the senior investment advisor had a track record of dedication and excellence. He confessed to the reporter than the year had been challenging but his strategy had bucked the trend. While the TSX  was down 10.4 percent year to date, the advisor's investments were only down 1.5 percent over the same period.

We help clients get through difficult financial periods, he claimed.

He was, of course, snowing the reporter. Comparing his portfolio to the TSX is not a reasonable comparison. He needed to compare his record to a true standard, a benchmark.

The benchmark beat the advisor by 5.55%.

I'm an income oriented investor. For this reason I look for a benchmark designed to track a portfolio with an income bent. One designed for retirees like me. I discovered that over the same period a respected income benchmark was up not down. The annualized return was 4.04 percent.

I like this benchmark. I believe the Financial Post also uses it, or one similar to it, from the same source. I'm sure the senior investment advisor is familiar with this benchmark and I'm sure he makes no reference to it on purpose. His portfolio failed to perform as well as a benchmark.

I have a personal benchmark: The TD Monthly Income fund. I know, it is not a true benchmark. But, it is a balanced fund designed to provide income. It suffers trading costs and other expenses that a benchmark avoids. If I can beat TDB622, I feel like a success.

As you can see, the financial advisor interviewed by The London Free Press also failed to beat this pseudo benchmark. TDF622, unlike the advisor, was in the black.

The fund's return was 1.9% better than the advisor's.

Financial advisors are also sales people. It's too bad our reporter wasn't more than a reporter, being a stenographer doesn't count.

Addendum: I didn't give the advisor's name as this is truly a good person. They give a lot of financial support to local charities, for instance. They do a good job, an honest job and they keep their clients happy. But nothing in the article indicates that they are  much more than an expensive babysitter for your portfolio. If you don't need a financial babysitter, you probably don't need this advisor.

It's a correction for a lot of my holdings.

I define a correction as a pullback of ten percent or more. This recent downturn is turning into a correction for a lot of my holdings.

What am I doing? Uh, shrugging my shoulders. I like the stuff I own and if it drops low enough, or stays down long enough for some of my dividend income to give me adequate cash, I will buy more. I'll see what has dropped the most and seems to have the best chance of a speedy recovery.

Whatever, I'm cool. I have factored some loss of dividend income into my budget for 2013. I have hunkered down financially, and I'm ready for the storm --- or is that cliff?

Thursday, November 8, 2012

Penn West shake-up

I own Penn West (PWT). I'm not happy owning PWT and haven't been for years. PWT has a poor aura. By that I mean one reads a lot of bad mouthing of the stock and the company behind that stock. The big dividend has not been seen in a positive light by many Penn West critics. Simply put, a lot of folk have not been enamored with the Canadian oil and gas producer for years, and one big complaint has been management.

I got into PWT through the backdoor. I owned a small junior oil concern, Canetic Trust. I had split my junior oil investment funds and put a little in Crescent Point, some in Inter Pipeline, a little in Petro Canada and some in Canetic. Petro Canada was swallowed by Suncor and Canetic was folded into Penn West. I still own a few hundred shares of Crescent Point and with Inter Pipeline above $20 I sold my shares in the Canadian company and moved on.

When PWT got down to about $13, I bought more. I averaged down. Over time I got my average book price down by half. Not a good sign. It tells you how much the weakening stock has fallen.

Well, the falling knife is still falling. My losses are still climbing. There has been a big shake-up in the executive offices of Penn West and this has unsettled the market's feeling about PWT at a time when the stock market overall is unsettled.

How low can PWT go? I don't know. I wouldn't even hazard a guess. Will I buy more if it drops again? Maybe. Only time will tell.

Personally, I'm glad to see that management changes are occurring. PWT management has worried many critics for years. I'm hopeful. Maybe the company will find the brake pedal and stop the steady decline in the value of their stock.

The first thing that they need to do is cut the dividend. At least, that is my gut feeling. Let me make it clear that I have no proof this will happen but I will not be surprised if it does. And the price of the stock may well fall on such an announcement.

Still, I've got time on my side. I can wait for PWT to get its house in order or possibly to be the target in a take-over. Either way, the stock should get a pop. Will it be enough to allow me to get out with my financial skin intact? Maybe.

A few facts:

  • Penn West's last trade yesterday was at $10.65.
  • Penn West lost 54-cents or 4.83 percent yesterday.
  • The dividend yield is now north of 10 percent at 10.1 percent.

When I do a little research into what others are saying, I find that Patrick Bryden CFA (Scotia Capital Inc. - Canada) says among other things:

". . . asset spread remains impressive and latent value is deep, however market awaiting delivery. While the departure is a significant change in leadership for the company, with no announced replacements, we expect the stock to continue to be volatile. We maintain our positive view of the company's resource exposure company and also hold that execution remains paramount in converting latent potential into share price appreciation for stockholders.

We maintain our 2-SP rating and our one-year target price of $18.00.

I'm buckling my investment seat belt and preparing for a wild ride.